Aldea’s Digital Service Solution: Bridging Technology and Agriculture to Empower Smallholder Farmers

• Farmers are dispersed and live in remote areas, with limited access to affordable and quality finance, services and inputs
• A farmer-led organisational structure with offline service offerings and longstanding relationships with farmers are in place

• A bottom-up approach – utilise the local ownership structure and self-regulating characteristics of farmer-led organisations & cooperatives to delegate activities and responsibilities
• A customer-centred approach – use information and data to identify
  and predict farmer needs, and to continuously improve and develop
  solutions that improve (digital) farmer services
  
• Holistic service selection – offer multiple services that complement each
  other to increase adoption by farmers and allow for integration of data
• Building own solutions in one cloud data centre, the source code owned
  by the organisation, improves control and interoperability between
  different solutions
• Pair the digital solution with human intermediation. This establishes
  and maintains farmer trust, while ensuring that clients meeting eligibility
  criteria, reducing the risk of fraud and adverse selection
• The organisation requires management with a strong vision on ICT,
  data and technology

• Sufficient penetration of mobile phones amongst farmers
  
• Suitable cloud services and technologies are available

The integration of the different digital solution applications facilitates data-informed decision-making, improves operational efficiencies and enables scale. For example, using the farmer data collected, Aldea created a credit scoring tool which pre-approves loans for clients with an excellent credit record, reducing loan approval time from 10 to 4 days. Aldea wants to further reduce this to 2-3 days, and by 2029, Aldea aims to evaluate 40% of member credit requests through an algorithm. Also, the database facilitates forecasting of farmer input and financing needs, enabling Aldea to buy inputs in bulk, lowering costs, and predicting when farmers need what type of financing. Moreover, the different applications allow Aldea to reach more farmers, faster.

Availability of data facilitates improved traceability and quality monitoring of coffee, ensuring more of Aldea’s coffee farmers meet certification criteria and can be sold as “speciality coffee”, at a premium of ~USD15-30 compared to commercial trade coffee². In the 2021/2022 season, Aldea exported a total of ~450 containers³ of coffee, of which ~40% was speciality coffee. By 2027/2028 Aldea hopes to almost double it’s annual coffee exports to ~800 containers³, with 60% being speciality coffee.

In June 2024 Aldea had a PAR30 of 1,8%, compared to a PAR30 of 3.4% of small MFIs in Nicaragua in March 2024⁴. Because of the data on farmer crop financing needs and ability to better predict client behaviour, Aldea is able to reduce its credit and fraud risk. The combination with its strong physical presence and offering a set of complementary services, further reduces the incentives for farmers to default.

Aldea’s strong and integrated technological strategy and approach has demonstrated to improve Aldea’ business’s resilience. During the COVID-19 pandemic, Aldea continued its business as usual and didn’t have to pause its services, as its processes and systems were already set-up to facilitate remote and online work. This is demonstrated, for example, by Aldea’s growth in financial services. Aldea went from ~7k active borrowers in Q2 2021 to ~10k active borrowers in Q3 2024, showing a ~35% increase⁵.

~75% of smallholders surveyed by Aldea in 2023 indicated to have improved their understanding and application of GAPs due to technical advice provided through WhatsApp⁶. 55-75% of surveyed farmers indicated to have noticed significant yield and quality improvements of their coffee plantations.

The applications facilitate remote access to a broad range of services (a.i. financial, input, transport, technical advice) at a time convenient for each farmer. For example, among farmers surveyed by Aldea, women farmers pointed out that accessing technical advice through the app is especially valuable for them, as they are often too busy with household responsibilities to attend trainings.

Because Aldea can predict farmers input needs, it can buy in bulk and apply the “Just In Time” inventory method, resulting in lower costs. Consequently, farmers can purchase high-quality inputs from Aldea at prices competitive with other input providers, who generally offer lower quality. To stimulate use of the digital applications, farmers purchasing inputs via the application experience a small additional discount of ~1-3%. Moreover, Aldea offers farmers the option to buy inputs on credit, improving input accessibility and affordability.

Through the applications, farmers have access to the details of their interactions with Aldea, improving transparency. For example, through the Aldea Móvill app, farmers have insights into the number of coffee bags and price per coffee bag sold to Aldea Coffee, the conditions and status of their loan from Aldea Global and the status of their inputs order at AldeaZON.

Aldea emphasised the catalytic effect – by committing finance and taking a risk, early financiers created trust in Aldea’s business, crowding in other finance providers. This includes commercial banks, who previously weren’t interested in providing financing to Aldea due to small ticket sizes and the lack of a guarantee.

The financing made available by impact and development focused FPs gave Aldea room to innovate, such as the digital service solution, which enabled Aldea to grow its business, and expand and improve its service delivery to smallholder farmers.

The FPs brought experience and expectations that steered and supported Aldea to improve its business practices. E.g., the IDH Farmfit Fund supported Aldea with improving its E&S risk management and Rabobank shared technology knowledge that allowed Aldea to develop some of its digital tools. Aldea also learned from interacting with the FPs - the way they do things and view things, the questions they ask, helped Aldea think about its business differently and create new ideas.

For different parts of its business, Aldea has 15+ lenders for relatively small loan amounts. Constructions where investors team up, like the joint investment in the coffee milling plant by Oikocredit and the IDH Farmfit Fund, simplify the coordination of investors for Aldea.

The construction and implementation of its own technologically advanced coffee milling facility allows Aldea to:

• increase its processing capacity with ~70% in a cost-efficient way, compared to when it was renting several different milling plants 
• bring in the de-pulping and fermentation process otherwise performed by farmers, improving quality and post-harvest weight maximization 
  • increasing farmer yields with an estimated ~8% 
  • Generating ~38% additional income for Aldea and its members, which is equivalent to additional payment to farmers of ~11% per 100lbs delivered to Aldea for processing
• improve environmental practices, reducing risk of non-compliance as well as reducing costs resulting from better resource efficiencies
  
  Take a look at the plant in this video